Pacific
Gas and Electric Company (PG&E) today began the auction process
for soliciting proposals from parties interested in purchasing its
Potter Valley Project, a hydroelectric facility in Mendocino and Lake
counties.

The
Potter Valley Project consists of two dams along the upper Main Stem
Eel River, a powerhouse in Potter Valley, and about 5,600 acres of
land, including Lake Pillsbury in Lake County.

PG&E
is in the second year of the minimum five-year process of obtaining a
new operating license from the Federal Energy Regulatory Commission
(FERC) for the project. PG&E will continue to own, operate and
relicense the project throughout the auction process.

The
new owner will take over the relicensing process after the project
sale and transfer is complete. The current FERC license expires in
2022, but Potter Valley Project will continue to operate on annual
licenses if the relicensing process goes beyond the current license
expiration date.

PG&E
announced it would auction the project last May, and today’s action
begins the marketing phase of the auction process. PG&E is using
a “request for offers” type of auction process that is intended
to meet the needs of both seller and buyer – and considers other
factors in addition to price.

“PG&E
wants to find a new owner with the appropriate qualifications and
experience to operate the project in a safe and compliant fashion.
The project has unique characteristics and we believe they have the
potential to yield significant value for the right owner,” said
Alvin Thoma, Senior Director of Power Generation at PG&E.

The
project diverts about one-fifth of the average annual flow of the
upper Main Stem Eel River at Van Arsdale Reservoir through a tunnel
and penstock to a powerhouse located in Potter Valley where it is
used to generate electricity. The amount of water diverted by the
project represents only 2 percent of the total flow of the Eel River
at its mouth. Before it is diverted, some of the water is collected
during the wet season and stored in Lake Pillsbury for later release
– also providing lake-based recreation opportunities.

After
the diverted water leaves the Potter Valley Powerhouse, it enters a
canal and the East Branch of the Russian River, where it provides
water to farms and communities in southern Mendocino and northern
Sonoma counties as well as improving fish habitat in the Russian
River. Per the conditions of the project’s operating license, water
flows in the upper Main Stem Eel River below the Van Arsdale
Reservoir are managed to closely mimic the upper Main Stem Eel
River’s natural flow.

PG&E
is seeking a new owner for the project as it no longer serves as an
economical source of electricity generation for its customers. Potter
Valley Project is far from PG&E’s other hydroelectric
facilities and regional headquarters, making it especially costly for
PG&E to operate. An increasingly competitive energy market, lower
generation needs forecasted on PG&E’s system, and the
increasing cost of operating the facilities were all factors in
PG&E’s decision.

Depending
on how many proposals are received and need to be evaluated, PG&E
expects to select proposals and begin formal negotiations with a
buyer by mid-2019. If all goes well, the sale and transfer of the
project could be completed within one-and-a-half to two years.

Approval
by FERC and the California Public Utilities Commission (CPUC) will be
needed prior to transfer of ownership.